Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-20479 February 6, 1925
YU CONG ENG, ET AL., petitioners,
vs.
W. TRINIDAD, Collector of Internal Revenue, ET AL., respondents.
Gabriel La O, Palma and Leuterio and Gibbs and McDonough for petitioners.
The City Fiscals Revilla, Guevara and Felix for respondents.

MALCOLM, J.:

The issue in these proceedings is the validity of Act No. 2972 of the
Philippine Legislature, popularly known as the Chinese Bookkeeping Law. It is
a question of paramount importance which the record shows, has been laid
before this court following the failure of diplomatic negotiations and
executive pressure to secure from the local law-making body either the
repeal of the law or a modification of its provisions. It is, moreover, a
question which, extensive argument and original investigation disclose,
stands in the shadowland betwixt constitutionality and unconstitutionality, to
the solution of which we propose to give careful consideration.

The petitioners are Chinese merchants claiming to represent themselves and

all other persons similarly situated and affected, particularly twelve thousand
Chinese merchants. The respondents, against whom the petition for
prohibition and injunction is directed, are the Collector of Internal Revenue,
the Fiscal of the City of Manila, and Honorable Pedro Concepcion, Judge of
First Instance of Manila. The allegations of the petition center on the
unconstitutionality of Act No. 2972 above-mentioned.

To the petition (later amended), a demurrer was interposed by the

respondents which met squarely the main issue of constitutionality, while
raising, in addition, the preliminary question of jurisdiction. Following oral
argument, the court overruled respondents' demurrer and required them to
answer. To respondents' answer to the amended petition, petitioners
presented a demurrer.

In order that the court might be assisted by having before it all possible facts
and circumstances which might aid it in arriving at a correct conclusion, the
parties were permitted to offer evidence to substantiate their claims. Nearly
one thousand pages of testimony, more or less relevant to the issue, have
resulted. While all of this testimony has been gone over with painstaking
care, it is not feasible for the court to encumber the decision with rulings on
the multitudinous objections which have perfunctorily been raised before the
commissioner.

Before passing to our principal task, it is necessary to say something about

the preliminary point of jurisdiction argued by counsel, relating to the
propriety of the constitutional question being decided in original proceedings
in prohibition.

The Supreme Court is granted both concurrent jurisdiction in prohibition with

Courts of First Instance over inferior tribunals or persons, and original
jurisdiction over Courts of First Instance when such courts are exercising
functions without or in excess of their jurisdiction. (Code of Civil Procedure,
sec. 516.) It is a jurisdiction, however, which must be exercised
circumspectly, for otherwise, the court would usurp the powers of judges of
First Instance. The law having given to judges of First Instance jurisdiction to
try criminal cases, the appellate court should not meddle with the initiation
or trial of such cases, except for good reasons, and should not permit the
substitution of extraordinary proceedings for appeal.

As before held by this court, and by the Federal courts, equity has power, to
be exercised in power cases, to restrain criminal prosecutions under
unconstitutional statutes, and to grant preliminary injunctions where the
constitutionality of a given penal law is doubtful and fairly debatable, and
permanent injunctions where the laws are held invalid. The remedy by
injunction to restrain the enforcement of unconstitutional statutes or abuse
of authority under a valid statute, seems to be limited to cases where
property rights are threatened with irreparable injury or where persons would
be subjected to a multiplicity of suits.

A more complicated question arises, with reference to what stage of a

threatened criminal prosecution, an accused person shall have the right to
test the validity of a criminal statute by means of original proceedings
presented in the appellate court. We believe the correct principle was
announced in Cadwallader-Gibson Lumber Co. vs. Del Rosario ( [1913], 26
Phil., 192). In other words, as a general rule, the question of constitutionality
must be raised in the lower court and that court must be given an
opportunity to pass upon the question before it may be presented to the
appellate court for resolution. Yet occasionally, under a recently enacted
statute affecting numerous persons and extensive property rights, liable to
give rise to a multiplicity of actions and numerous prosecutions, it is proper,
right at the threshold of a prosecution, to have the validity of a given law
determined in the interest of the accused and of the public, so as to permit
of the orderly administration of justice. (Ex parte Young [1908], 209 U.S.,
123; Truax vs. Raich [1915], 239 U. S., 33; Wilson vs. New and Ferris [1917],
243 U. S., 332; Hammer vs. Dagenhart [1918], 247 U.S., 251; International
News Service vs. Associated Press [1918], 248 U.S., 215; C. A. Weed &
Co. vs. Lockwood [1920], 255 U.S., 104; Terrace vs. Thompson [1923], 263
U.S., 197; Young vs. Rafferty [1916], 33 Phil., 556; Kwong Sing vs. City of
Manila [1920], 41 Phil., 103; Dimayuga and Fajardo vs. Fernandez [1922], 43
Phil., 304; and Fleischmann, Injunctions Restraining Prosecution Under
Unconstitutional Statutes, 9 American Bar Associations Journal, March, 1923,
p. 169.)

Inasmuch as the property and personal rights of nearly twelve thousand

merchants are affected by these proceedings, and inasmuch as Act No. 2972
is a new law not yet interpreted by the courts, in the interest of the public
welfare and for the advancement of public policy, we have determined to
overrule the defense of want of jurisdiction in order that we may decide the
main issue. We have here an extraordinary situation which calls for a
relaxation of the general rule.

We come then to take up the question of the validity of Act No. 2972. Said
Act reads as follows:

No. 2972. — AN ACT TO PROVIDE IN WHAT LANGUAGE ACCOUNT BOOKS

SHALL BE KEPT, AND TO ESTABLISH PENALTIES FOR ITS VIOLATION.

Be it enacted by the Senate and House of Representatives of the Philippines

in Legislature assembled and by the authority of the same:

SECTION 1. It shall be unlawful for any person, company, partnership

or corporation engaged in commerce, industry or any other activity for
the purpose of profit in the Philippine Islands, in accordance with
existing law, to keep its account books in any language other than
English, Spanish or any local dialect.
 SEC. 2. Any person violating the provisions of this Act shall, upon
conviction, be punished by a fine of not more than ten thousand pesos,
or by imprisonment for not more than two years or both.

SEC. 3. This Act shall take effect on November first, nineteen hundred
and twenty-one.

Approved, February 21, 1921.

Subsequently, pursuant to the provisions of Act No. 2998, Act No. 2972 was
made to take effect on January 1, 1923. But due to the unavailing efforts of
the Secretary of War, the present Governor-General, and the Chinese
Community to have Act No. 2972 repealed, so counsel for the petitioners
intimates, its enforcement was suspended until the adjournment of the
Legislature in February, 1923.

On March 2, 1923, the agents of the Bureau of Internal Revenue, in the

exercise of their legitimate functions, inspected the books of account of the
Chinese merchant Yu Cong Eng. Upon finding that said books were not kept
in accordance with their understanding of the provisions of Act No. 2972,
they took possession of the merchant's books and referred the matter to the
city fiscal of Manila for appropriate action.

The city fiscal, considering that Yu Cong Eng had committed a violation of the
law, on March 7, 1923, caused an information to be filed, subscribed, and
sworn to before Judge of First Instance Concepcion, thereby giving rise to
criminal case No. 25551 of the Court of First Instance of Manila. This
information alleged in substance that the accused merchant had kept his
books of account "only in Chinese, instead of keeping or causing them to be
kept in English, Spanish, or any local dialect, thus rendering it difficult for the
agents and authorized representatives of the Government of the Philippine
Islands and of the City of Manila, to examine and inspect the aforementioned
books of account, thereby preventing and hindering the investigation and
determination of all the amount that said accused was, is, or will be under
obligation to pay for licenses, permits, and taxes." A warrant of arrest was
issued by the Judge of First Instance before whom the information was filed,
and in compliance therewith, the accused merchant, now become the instant
petitioner, was arrested.

The antecedents of these proceedings, therefore, do not affect directly any

other person except the petitioner Yu Cong Eng who says that he neither
reads, writes, nor understands the English or Spanish language or any local
dialect, although inferentially affecting all other merchants in a like situation.

To properly appreciate the situation, we must go back a little further into the
history of the case and must have before us the applicable provisions of
Philippine law.

The sales tax has been in force in the Philippines for a number of years. Our
law provides for privilege taxes to be levied on certain businesses and
occupations. These percentage taxes on business are payable at the end of
each calendar quarter in the amount lawfully due on the business transacted
during the past quarter. It is made the duty of every person conducting a
business subject to such tax, within the same period as is allowed for the
payment of the quarterly installments of the fixed taxes without penalty, to
make a true and complete return of the amount of the receipts or earnings of
his business during the preceding quarter and pay the tax due thereon. All
merchants not specifically exempted must pay a tax of one and one-half per
cent on the gross value in money of the commodities, goods, wares,
merchandise sold, bartered, exchanged, or consigned abroad by them, such
tax to be based on the actual selling price or value of the things in question
at the time they are disposed of or consigned. (Administrative Code, secs.
1453 et seq.; Act No. 3065.)

The income tax has also been established here for sometime, first pursuant
to an Act of Congress and later pursuant to an Act of the Philippine
Legislature (Act No. 2833, as amended by Act No. 2926). The customary
returns are required from individuals and corporations. The tax is computed
and the assessments are made by the Collector of Internal Revenue and his
agents.

The sales tax and the income tax furnish a substantial part of the revenue.
Roughly speaking, about P10,000,000 from the sales tax and about
P2,000,000 from the income tax are secured annually. (Exhibit 13.) Any
appreciable leaks in these sources of governmental revenue would be highly
undesirable.

At the time the Internal Revenue Law of the Philippine Islands was originally
enacted, the Spanish Code of Commerce was in force, and this Code still
remains the centerpiece of our commercial system, although considerably
battered by amendatory laws. The Code of Commerce provides that
merchants shall keep: (1) A book of inventories and balances; (2) a daybook;
(3) a ledger; (4) a copying book for letters and telegrams; and (5) the other
books required by special laws. These books are supposed to be presented
by merchants to a justice of the peace for authentication. Merchants may
furthermore keep other books that they consider advisable, according to the
system of bookkeeping adopted. (Code of Commerce, arts. 33 et seq.;
Administrative Code, sec. 214; Blanco, Derecho Mercantil, Tomo 1, pp. 561,
562.)

The Spanish Code of Commerce, it is thus seen, is silent as are all the codes
which follow the French system, regarding the language in which books of
account must be kept.

Under the provisions of the Code of Commerce and of the Internal Revenue
Law, the Collector of Internal Revenue had authority "to require the keeping
of a daily record of sales. No one could say with any certainty what the
amount of the tax would be without such data." (Young vs. Rafferty, supra.)
The collector of Internal Revenue was also granted the power to make
regulations prescribing the manner in which the proper books, invoices, and
other papers shall be kept, and entries therein made by the persons subject
to the merchant's tax. (Act No. 2339, secs. 5, 6 [j]; Administrative Code, sec.
1424 [j].)

Taking advantage of his supposed authority, pursuant to the above cited

provisions of law, the Collector of Internal Revenue issued a circular letter on
October 8, 1914, approved by the Secretary of Finance and Justice, requiring
every merchant and the manufacturer with certain specified exceptions, who
was subject to the merchant's tax, to keep a record of their daily sales either
in the English or the Spanish language. The validity of this regulation was
challenged in the case of Young vs. Rafferty, supra. The defense of the
Collector of Internal Revenue was that the regulation issued by him had for
its object the protection of the Government and to prevent the non-payment
of the merchant's and the percentage taxes. Following trial in the lower court
and appeal, the Supreme Court held that sections 5 and 6 of Act No. 2339
did not empower the Collector of Internal Revenue to designate the language
in which the entries in such books are made by merchants subject to the
percentage tax. Omitting portions of the opinion handed down by Mr. Justice
Trent, some of which will be noticed in other connections, it is only necessary
for us to quote the portion which deals with the subject at hand, namely:
 It is also urge that the regulation is designed to protect the
Government against evasion of the percentage tax. If it be necessary
to impose such a burden upon so large a number of the business
community in order that the Government may protect itself from such
losses, we apprehend that it was never intended that the initiative
should be taken by the Collector of Internal Revenue. The condition
complained of by the Collector has confronted the Government ever
since the present system of internal revenue taxes was inaugurated in
1904. It is not for the administrative head of a Government bureau to
say that such an obstacle to the collection of taxes shall be removed
by imposing burdens not specifically authorized in the law itself.

In view of the fact that a particular language is not essential to the

recording of the information desired by the Collector and the
enforcement of the objectionable provisions of his circular would be a
very important step in the solution of the language problem in this
country, amounting, we believe, to a question of public policy which
should not be dictated by any administrative authority, we must
conclude that the Collector has exceeded his authority in this
particular. In reaching this conclusion, we have carefully avoided using
any language which would indicate our views upon the plaintiffs'
second proposition to the effect that if the regulation were an Act of
the Legislature itself, it would be invalid as being in conflict with the
paramount law of the land and the treaties regulating certain relations
with foreigners. (Emphasis ours.)

Mr. Justice Carson, in a concurring opinion of some importance as will

hereafter be emphasize, said:

I concur, on the ground that under the order of the Collector, if strictly
enforced, the tens of thousand of merchants, petty storekeepers and
others affected by its terms, both native and foreign, who have no
adequate knowledge of either English or Spanish, would be required in
effect not only to keep a record of the results of their business
transactions in English or Spanish, but also to conduct such
transactions in one or other of those languages.

I do not question the authority of the Collector to prescribe rules for

the keeping of such records or transcripts of records of the results of
mercantile transactions as may be reasonably necessary in order to
 eliminate fraud or concealment, and to expedite the labors of those
charged with the collection of taxes: but I do not think that he was any
authority to require the keeping of the original record of the vast
number of these transactions in a tongue unknown to the parties; and I
think furthermore that his authority to prescribe regulations intended
to expedite the collection of taxes of this nature, is necessarily limited
to the promulgation of regulations reasonably necessary to the end.

As will at once be noticed, the Supreme Court limited its decision to the
annulment of the circular of the Collector of Internal Revenue. It left for the
Legislature to determine if a law on the subject should be enacted, without
expressing any opinion as to the validity of such a law.

Following some agitation on the subject, the then Governor-General, in a

message to the Legislature on October 16, 1920, recommended for
consideration "Legislation as already approved by the Senate should require
that all business houses keep their books in English or Spanish, or in any one
of the local Philippine dialects, in order to avoid wholesale frauds upon the
Public revenues." The bill was presented in the House of Representatives by
Representative Urgello with the following explanatory note:

As all of the merchants doing business in the Philippines are not of the
same nationality, some of them keep their books of account in their
native language. The examination of these books by the agents of the
Government for their proper verification, is made with some difficulty,
inasmuch as in many cases it requires the help of a translator which
constitutes an expense to the public treasury.

Uniformity and facility in the examination and investigation of these

books require that the same be kept by the merchants, whether
individuals or corporations, in English or Spanish.

This is the object of the attached bill.

After the Philippine Legislature had passed Act No. 2972, the present
Governor-General in a message asked for either the repeal or a modification
of the law. Hearings before committees of the Legislature were permitted.
According to the report prepared and submitted by the Chairman of the
Committee on Revision of Laws of the House of Representatives, which we
feel at liberty to take into consideration, at the hearing before his committee
the representatives of the Chinese community advocated the repeal of Act
No. 2972, but this was strongly opposed by the representatives of the Bureau
of Audits, and the Bureau of Internal Revenue. The representative of the
Bureau of Internal Revenue, Mr. Posadas, "gave repeated assurances before
the Committee that due to the unintelligibility of the books of Chinese
merchants, because of the language in which the same was written, the
public treasury was being defrauded annually in several millions of pesos,
and that in order to protect the Government it is necessary to uphold Act No.
2972." (Exhibit 3.) Eventually, the Philippine Legislature, with the exception
that it postponed the taking effect of the law, refused otherwise to modify it.

There has next followed the instant proceedings, by means of which an

expression of opinion is sought to settle the conflict of views as to the
constitutionality of Act No. 2972. The law is attacked by the petitioners as in
violation of treaty and constitutional rights of Chinese merchants, domiciled
in the Philippine Islands. It is contended with marked earnestness, that the
law is unreasonable and oppressive in nature, and repugnant to the
provisions of the Fourteenth Amendment to the Constitution of the United
States and of the corresponding provisions of the Jones Law, the Act of
Congress of August 29, 1916, guaranteeing to all persons the equal
protection of the laws. The law is defended by the city fiscal of Manila as a
proper and reasonable exercise of the police power of the Philippine
Government, and of its power of taxation.

Four questions suggest themselves for discussion. What would be the

probable effect, if Act No. 2972 was put in operation? What was the purpose
of the Legislature in enacting Act No. 2972? What are the respective legal
rights of the Chinese and of the Government? What is a logical construction
of Act No. 2972? In connection with the first question, it is, of course,
undeniable that we cannot declare a legislative Act void because it conflicts
with our opinion of what is just or expedient. Nevertheless, the effects and
consequences enter with more or less force into consideration, whenever the
validity of any law is in issue. (See 2 Lewis' Sutherland Statutory
Construction, pp. 908 et seq.)

The pleadings, the evidence, and the decision in Young vs. Rafferty, supra,
disclose with regard to the mercantile life of the Philippines, the following
facts:

There are approximately 85,000 merchants of all nationalities in the

Philippines, to whom Act No. 2972 applies. Of this number, 71,000 are
Filipinos who may use their own dialects, they prefer English or Spanish.
Approximately 1,500 are American, British, or Spanish subjects, who are
permitted to use their native languages. Possibly 500 are foreign
nationalities most of whom know the English or Spanish language. Of the
remainder, between 10,000 and 12,000 are Chinese. The aggregate
commercial business transacted by the Chinese merchants represents about
sixty per cent of the total business done by all the merchants in the
Philippine Islands. According to Mr. H.B. Pond, vice-president and general
manager of the Pacific Commercial Company, the Chinese "are the principal
distributing factors in the Philippine Islands of imported goods, and the
principal gatherers of goods for exportation in the more remote places," and
if the Chinese were driven out of the business, "there would be no other
system of distribution available throughout the Islands." It is further claimed,
on the one hand, that not to exceed one per cent of the Chinese merchants
in the Philippine Islands understand English, Spanish, or a local dialect
sufficiently well to be able to keep or revise their own books of account in
any one of these languages, and that not to exceed ten per cent have even a
working knowledge of either English, Spanish, or a local dialect, and on the
other hand, that at least two-thirds of the Chinese businessmen can easily
comply with the law.

Counsel for the petitioners is sponsor for the sweeping statement that "the
enforcement of Act 2972 would probably cause more damage and less good
than any other law which has been enacted in the world." This strong stand
is to a certain extent corroborated by resolutions adopted and signed by the
principal business house in the City of Manila and by a number of chambers
of commerce (Exhibits C, D, E, F, G, H, I, and J, attached to the petition); by
the vigorous protest of the Chinese foreign office (Exhibit K); by the opinions
expressed by high officials in the War Department "that the law is
fundamentally unwise" (Exhibit L), and "is obstructive of good understanding
with our neighbors" (Exhibit M); and by the testimony of a large number of
Chinese merchants and of other well qualified persons to the effect that
sufficient bookkeepers are not available, that it would not be possible for
many Chinese merchants, especially the smaller ones, to comply with the
law, and that if the Chinese merchants were compelled to keep their books in
any language other than the Chinese language, it would bring serious
embarrassment to the great majority and might even drive many of them out
of business.
Mr. Dee C. Chuan, the President of the China Banking Corporation and of the
Chinese Chamber of Commerce, and Honorable Chow Kwo Hsien, Chinese
Consul General for the Philippine Islands, testified that they, in collaboration
with Chinese merchants, had conducted an investigation from which they
made the following estimate of the distribution of sales among the Chinese:

Of the wholesale merchants, 50 had average amount of sales of over

P1,000,000; 150, over P500,000; 400, over P100,000, and 2,735, over
P40,000. Of the 8,445 retail merchants, the average amount of sales was
P5,446.40. Basing their calculations on the above, it was found that the
annual net income of the 8,445 Chinese retail merchants would not exceed
P500 each, and of 2,000 of the 3,335 wholesale merchants, not to exceed
P1,000. (Exhibit G.) The same investigation disclosed that not to exceed 12
Chinese firms are actually keeping their books in a language other than
Chinese. The Chinese Consul General further testified that from his inquiries,
he had found that the great majority of the Chinese merchants are utterly
unable to comply with Act No. 2972.

Mr. William T. Nolting, President of the Bank of the Philippine Islands and
formerly Collector of Internal Revenue, testified to the following salient facts:
1. Not over one per cent of the Chinese merchants are qualified to transact
their business in English, Spanish, or a native dialect; 2. It would be
impossible to obtain accounts to assist them in keeping their books in
English, Spanish, or a local dialect, although this deficiency might be
overcome in the future; 3. If the merchant is unable to understand his
accounts and cannot impose extreme confidence; in his bookkeeper, he is in
a precarious position at all times; 4. An attempt to enforce Act No. 2972
would not facilitate the collection of taxes from the Chinese merchants but
on the other hand might prove prejudicial both to the interests of the
Government and of the Chinese; 5. When he was in charge of the Bureau of
Internal Revenue, he never experienced any difficulty in finding and
employing a sufficient number of competent and honest Chinese
accountants to make the necessary inspection of the books of Chinese
merchants; 6. The honesty of the Chinese merchants in making the
declarations of their sales compares favorably with other nationalities in that
respect; and 7. To permit the Chinese merchants to keep two sets of books,
one in Chinese and the other in English, Spanish, or some local dialect, would
be a most dangerous practice because entries might be made in one set that
would not be made in the other.
The reply of the fiscal is to the effect that the oppressiveness of the law has
been considerably exaggerated, that it applies as well to Japanese and other
foreign merchants who do not complain, that only a relatively small per cent
of the Chinese merchants seek to obstruct the enforcement of the law, that
bookkeepers are available if the Chinese wish to employ them, and that the
new law will facilitate governmental inspection of merchants' books.
Numerous witnesses have been called and numerous documents have been
offered to substantiate the stand taken by the Government. We will here
notice only an indorsement by Wenceslao Trinidad, former Collector of
Internal Revenue, and the testimony of Juan Posadas, the present Collector of
Internal Revenue.

Former Collector Trinidad, in a communication addressed to the Secretary to

the Governor-General on September 22, 1921, said:

During the year 1920, internal revenue tax receipts were issued to
95,363 merchants and manufacturers, 183 printers and publishers,
10,424 common carriers, 10,967 contractors and warehousemen,
58,942 peddlers of merchandise and 1,001 brokers. All of the above-
mentioned persons are required to pay percentage taxes on their gross
sales or receipts. On account of the nature of this tax, these persons
are required to keep books of accounts wherein they can enter the
amounts of business done by them.

This Bureau has no statistics to show the number of Chinese engaged

in different businesses subject to percentage taxes but it is safe to say
that they represent fully sixty per cent of the numbers stated above.
All of these Chinese merchants keep their accounts in Chinese, with
the exception of a very few large business houses which keep two sets
of books of accounts, one in Chinese and the other in Spanish. There
are also other businessmen who do not keep their books of accounts
either in English or Spanish. These are Germans, Japanese, Syrians and
Hindus. Their number cannot be ascertained due to the lack of
statistics but there are many of them in the Islands, especially the
Japanese.

The Bureau of Internal Revenue had up to this time employed 17

Chinese accountants, two Hindus and one Japanese. All of these
accountants have been separated from the service with the exception
of four Chinese accountants who are at present still employed in the
 Bureau. Out of the seventeen Chinese accountants employed, five
were discharge for graft, seven resigned or were forced to resign for
their unsatisfactory services rendered or for suspicion of graft, and one
deceased. In spite of this number of accountants employed, only very
little number of Chinese books have been investigated and audited,
and in the majority of them under-declarations of sales or receipts
have been found.

There are also a number of Chinese who are not subject to percentage
taxes, but who have books of accounts that need to be audited for
income-tax purposes.

It can be seen from the foregoing statements that the law requiring
merchants to keep their books in English, Spanish or any of the local
dialects, is necessary in order to protect the revenues of the
Government.

Collector Juan Posadas, in reply to question, and corroborated by other

witnesses, made among others the following interesting statements:

Mr. FELIX. If the books of account, not only of the Chinese merchants
but of the other foreign merchants, were kept in their own languages
and not in English, Spanish, or some local dialect, would it be possible
to have the books of accounts of these merchants audited by the
agents or employees of the Bureau of Internal Revenue? ... — Mr.
POSADAS. It would be impossible, unless our office had a personnel
sufficiently numerous and competent to make the audits of the books
of account in the different languages in which they were kept.

Mr. FELIX. Has the Bureau of Internal Revenue that sufficient and
competent personnel to audit the books of account of merchants who
do not keep their books in Spanish, English, or some local dialect? —
Mr. POSADAS. No, sir, we have only an insignificant number of Chinese
accountants to make examinations of the books of the Chinese
merchants.

xxx xxx xxx

Mr. FELIX. If the Bureau of Internal Revenue were not able — as

according to you it is not able — to examine properly the books of
accounts of merchants who do not keep their books in English,
 Spanish, or some local dialect, may the case arise wherein those
merchants who do not keep their books in the languages permitted by
Act No. 2972 would fail to pay the full amount of taxes due to the
internal revenue, even though they were acting in good faith? ... — Mr.
POSADAS. Yes, sir, because judging from the audits even of those
books of accounts which are intelligible to the office personnel, the
office has found many differences, or items not declared for the
purpose of taxation.

xxx xxx xxx

Mr. FELIX. Do you know how many returns of merchants were

examined in 1922 by the Chinese accountants of the income tax
division of your Bureau? ... — Mr. POSADAS. During that year, the
Chinese accountants in the income tax division inspected 477 returns
of Chinese.

xxx xxx xxx

Mr. FELIX. Do you know whether there were any undeclarations in

those cases, that were inspected that you have referred to? ... — Mr.
POSADAS. In the comparison of these returns with the books of
account of the interested parties, differences were found which amount
to more than P600,000 which was not declared.

xxx xxx xxx

Mr. GIBBS. And, therefore, assuming that it would be possible to

employ a sufficient number of competent Chinese inspectors of books
of account, there would be no advantage in the enforcement of Act No.
2972 except in so far as it might aid the directors of the Bureau and
the chiefs of division in making the inspections incident to deciding
disputes between the inspectors and the merchants that you have
mentioned? Mr. POSADAS. The advantage of the Accounting Law,
which compels merchants to keep their books in English, Spanish, or
some local dialect, lies precisely in the fact that it would facilitate the
inspection of these books of account by the employees of the Bureau
of Internal Revenue, and enable them to check up the taxes which
have been paid the merchants and ascertain whether or not they agree
with the transactions actually had. This work is at present being done
so far as concerns the merchants who keep their books in languages
 comprehensible to the Bureau, and to a certain extent it means that
these merchants are penalized. On the other hand, it has been almost
impossible to do this with regard to those merchants who keep their
books entirely in languages not comprehensible to the office, and the
net result therefore is that while we can collect differences in taxes due
from part of the merchants, it is almost impossible to do so with regard
to the other part.

xxx xxx xxx

Mr. GIBBS. But supposing that you had also Chinese accountants
competent to act as supervising agents in the provinces, then what
advantage would there be in enforcing Act No. 2972? — Mr. POSADAS.
The advantage would consist precisely in the fact that we would avoid
the duplication of personnel, because otherwise we would have to
duplicate the personnel in each district by employing Filipinos and
Chinese.

Mr. GIBBS. Could you not easily put in a Chinese district inspector and
a Filipino district inspector, leaving it to the Chinese district inspector
to inspect the books of the Chinese and to the Filipino district inspector
the books of the Filipinos and others? — Mr. POSADAS. It is physically
impossible to employ Chinese supervisors, in view of the fact that up to
this time I have never known of a Chinese who has qualified himself in
the civil service to occupy the position.

xxx xxx xxx

Mr. GIBBS. Is it not true, Mr. POSADAS, that the practice of inspecting
the books of the account of the Chinese by means of Chinese
accountants has been followed by the Bureau of Internal Revenue in
the Philippines for the past twenty years or more? — Mr. POSADAS. To
judge from the results of the inspections made by my Bureau during
my incumbency therein, I am led to believe that the inspections which
were formerly made were superficial, in view of the fact that the
Bureau during these latter years, he discovered large differences which
were never declared for the purposes of taxation.

xxx xxx xxx

 Mr. GIBBS. Let's put the question in another form, Mr. Posadas: Is it not
a fact that the only possible benefit which the Bureau of Internal
Revenue would derive from the enforcement of Act No. 2972 would be
in so far as it might assist the Bureau in checking up the information
required by its regulations? — Mr. POSADAS. Yes, sir, and to determine
whether any items subject to taxation had been omitted.

Mr. GIBBS. Another question, Mr. Posadas: Don't you think that by
means of Chinese accountants, much more satisfactory kept in Chinese
than from books kept abominably in English or Spanish? — Mr.
POSADAS. Even though the books which are kept in a language other
than Chinese were abominably kept, as long as they contain the
entries of all the transactions are carried out by a merchant or by a
person subject to taxation, it would always be better than a book which
is incomprehensible to the administrators of the Bureau.

Some slight consideration of the language question in general and of the

language question in the Philippines in particular, will assist us in
determining if the effect of enforcing Act No. 2972 will cause as much
hardship and will be so oppressive on one particular nationality as to nullify
the law, or whether the judiciary can constitutionally enforce the law.

Language is the medium by which thoughts are conveyed from one person to
another. The law before us recognizes as permissible mediums for business
and taxation purposes, English — the language of the people of the British
Empire and the Republic of the United States; Spanish — the language of the
people of Spain; and local dialects — the language of the home in the
Philippines. Of these native dialects, as disclosed in a statement prepared by
Dr. T.H. Pardo de Tavera, Director of the Philippine Library and Museum, there
are a grand total of eighty-seven, six with extensive literature, and the others
with little or no literature. (Exhibit F.) The law fails to take cognizance of the
Chinese language, one of the oldest and one of the most extensively used
languages in the world.

The Philippine Organic Act of Congress of August 29, 1916, recognizes for
electoral purposes, "Spanish, English, or a native language." (Sec. 15.) It
enumerates as a qualification for an elective member of the Senate and the
House of the Philippine Legislature, ability "to read and write either the
English or Spanish language." (Sec. 13, 14.) The Municipal Law requires as a
qualification for an elective municipal officer, ability to read and write
intelligently either Spanish, English, or the local dialect. (Administrative
Code, sec. 2174.) The official language of the courts and their records is at
present either English or Spanish, although in practice, Spanish is used more
extensively in the lower courts, and English in the appellate court. (Code of
Civil Procedure, sec. 12, as amended by Act No. 2830. ) The official language
of the legislative branch of the Government is either English or Spanish,
although in practice Spanish is more extensively used, while exactly the
reverse is true of the executive branch of the Government. In compliance
with the President's Instructions to the Commission of April 7, 1900, full
opportunity has been given to all the people of the Island to acquire the use
of the English language, with the result that English is made the basis of
public and private school instruction. (Administrative Code, sec. 922.) In the
customs service, the law provides that the cargo manifest and each copy
thereof shall be accompanied by a translation into English, if originally
written in a language other than English. (Administrative Code, sec. 1226.)

The above brief description of the language situation at least discloses some
of the difficulties which have beset the attempt to hasten the adoption of a
common language in the Philippines. Yet it is evident, that the Filipino people
have cheerfully imposed upon themselves the burden of acquiring one more
languages other than their native languages and have now, through their
elective representatives, sought to require conformity with governmental
policy by a large class of foreign residents.

In the United States during the months immediately following the conclusion
of the World War, a number of States passed statutes in substantially the
same form forbidding the teaching of any modern language except English,
to children below the eight grade in any school. The United States Supreme
Court held the statutes unconstitutional on account of having no reasonable
relation to some purpose within the competency of the State to effect, and
on account of violating the constitutional guarantee of liberty in the Federal
Constitution. "The protection of the Constitution extends to all," it was said,
— "to those who speak other languages as well as to those born with English
on the tongue." (Meyer vs. Nebraska, Bartels vs. Iowa, Pohl vs. Ohio,
Nebraska District of Evangelical Lutheran Synod vs. Mckelvie [1923], 262
U.S., 390, 404; XII Michigan Law Review, Jan., 1924, p. 248.)

In other countries, however, notably in the Republics in the Americas, which

have had their institutional law greatly influenced by the United States
Constitution, laws are on the statute books which permit only Spanish to be
used in commercial transactions. This is the system found in Bolivia, Chile,
Colombia, Ecuador, Guatemala, Honduras, Mexico, Salvador, Uruguay, and
Venezuela. (Commercial Laws of the World, vols. 1, 2 3, 4, 5, 6, 10, and 20;
Manzano, Bonilla y Miñana, Codigos de Comercio, Tomos II y III; Wheless,
Compendium of the Laws of Mexico, vol. I; Exhibit 12.)

The purpose of the Legislature in enacting Act No. 2972 is disclosed by the
decision of this court in Young vs. Rafferty, supra, by the messages of the
Governor-General, by the hearings before the committees of the Philippine
Legislature, and by other sources. All these indicate that the Act is a fiscal
measure intended to facilitate the work of the government agents and to
prevent fraud in the returns of merchants, in conformity with the sales tax
and the income tax. For instance, in the decision in Young vs. Rafferty, supra,
it was stated: "... It need hardly be said that the record which merchants are
required to keep of their daily sales under the provisions of the circular letter
of the Collector set out in the complaint is simplicity itself, and that it will, if
honestly and faithfully kept, enable the Government to collect the
percentage tax exactly due it. ..."

Conceded that the Chinese handle sixty per cent of the aggregate business
of the Philippines, approximate equality in taxation demands that they pay
something like the same proportion in taxes for the support of the State.

In enacting Act No. 2972, the Philippine Legislature did so pursuant to the
wide authority which is delegated to it by Organic law. The Organic Act, the
Act of Congress of August 29, 1916, provides "That general legislative power,
except as otherwise herein provided, is hereby granted the Philippine
Legislature, authorized by this Act." (Sec. 8, 12.)

The police power exists in the Philippine Islands in about the same form and
to the same extent as in a State of the American Union. Under the general
police power, persons and property in the Philippines have been subjected to
various kinds of restrictions and burdens, in order to secure the general
health, comfort, and prosperity of all. As indicated by a quotation of
petitioners, the police power is not limited to regulations necessary for the
preservation of good order or the public health and safety, but the
prevention of fraud, cheating, and imposition is equally within its scope.

The rule to follow in the application of the police power is that announced in
the leading case of Lawton vs. Steele ( [1894], 152 U.S., 133), oft quoted
with approval by our Supreme Court, namely:
 . . . Large discretion is necessarily vested in the legislature to
determine, not only what the interests of the public require, but what
measures are necessary for the protection of such interests. To justify
the state in thus interposing its authority in behalf of the public, it must
appear, first, that the interests of the public generally, as distinguished
from those of a particular class, require such interference; and, second,
that the means are reasonably necessary for the accomplishment of
the purpose, and not unduly oppressive upon individuals. The
legislature may not, under the guise of protecting the public interests,
arbitrarily interfere with private business, or impose unusual and
unnecessary restrictions upon lawful occupations. . . . (See further,
U.S. vs. Toribio [1910], 15 Phil., 85; Case vs. Board of Health and Heiser
[1913], 24 Phil., 250; U.S. vs. Gomez Jesus [1915], 31 Phil., 218;
Churchill and Tait vs. Rafferty [1915], 32 Phil., 580; and Rubi vs.
Provincial Board of Mindoro [1919], 39 Phil., 660.)

The power of taxation is, likewise, in the Philippines as in the United States,
the strongest of all the powers of government, practically absolute and
unlimited. The familiar maxim early announced by Mr. Chief Justice Marshall
for the United States Supreme Court and since frequently invoked by the
courts is that "the power to tax involves the power to destroy." (M'Culloch vs.
Maryland [1819], 4 Wheat., 316.) It is a legislative power. All its incidents are
within the control of the legislature. It is the Legislature which must
questions of state necessarily involved in ordering a tax, which must make
all the necessary rules and regulations which are to be observed in order to
produce the desired results, and which must decide upon the agencies by
means of which collections shall be made. (1 Cooley on Taxation, pp. 7, 43,
46, 54; Cowles vs. Brittain [1822], 2 Hawks, 204; Genet vs. City of Brooklyn
{1885], 99 N.Y., 296; Felsenheld vs. U. S. [1902], 186 U.S., Muñoz & Co. vs.
Hord [1909], 12 Phil., 624.)

It is equally manifest that the power to tax is not judicial power and that a
strong case is required for the judiciary to declare a law relating to taxation
invalid. If, of course, so great an abuse is manifest as to destroy natural and
fundamental rights, it is the duty of the judiciary to hold such an Act
unconstitutional. Nevertheless, certain of the limitations are such that they
must address themselves exclusively to the legislative department, and be
subject only to review by the people who elect the members of this
department.
To use the language of Judge Cooley:

In order to bring taxation imposed by a state, or under its authority,

within the scope of the provision of the fourteenth amendment which
prohibits the deprivation of property without due process of law, the
case should be so clearly and probably an illegal encroachment upon
private rights as to leave no doubt that such taxation by its necessary
operation is really spoliation under the power to tax. ... The inhibition
of the amendment was designed to prevent any person or class of
persons from being singled out as a special subject for discriminating
and hostile legislation ... In the construction of the revenue laws,
special consideration is of course to be had of the purpose for which
they are enacted. That purpose is to supply the government with
revenue. But in the proceedings to obtain this it is also intended that
no unnecessary injury shall be inflicted upon the individual taxed.
While this is secondary to the main object — the impelling occasion of
the law — it is none the less a sacred duty. Care is taken in
constitutions to insert provisions to secure the citizen against injustice
in taxation, and all legislative action is entitled to the presumption that
this has been intended. . . . (1 Cooley on Taxation, pp. 55, 56, 75, 452.)

The petitioners are Chinese subjects. The treaty rights accorded the Chinese
are those of the most favored nation. Their constitutional rights are those
accorded all aliens, which means that the life, liberty, or property of these
persons cannot be taken without due process of law, and that they are
entitled to the equal protection of the laws, without regard to their race. (Yick
Wo vs. Hopkins [1885], 118 U.S., 356; Kwong Sing vs. City of Manila, supra.)
Our Code of Commerce and our Corporation Law permit foreigners, and
companies created in a foreign country, to engage in commerce in the
Philippine Islands. (Code of Commerce, art. 15; Act No. 1459, sec. 73.) The
rights of these Chinese aliens are not less than the rights of American and
Philippine citizens. Nor more.

Six decisions bearing particularly on the rights of the Chinese, three coming
from the United States Supreme Court, two from the Supreme Court of the
Philippine Islands, and one from the Supreme Court of Hawaii have at least
persuasive application to the instant proceedings. Two of the decisions of the
United States Supreme Court that we have in mind, Barbier vs. Connolly
( [1884], 113 U.S., 27) and Yick Wo vs. Hopkins ( [1885], 118 U.S., 356), are
so well known as merely require citation, while a recent series of cases on
the language question have already been mentioned. We only stop to quote
one significant sentence taken from Mr. Justice Field's opinion, pertaining to
the Fourteenth Amendment to the United States Constitution, in the first
cited case, namely:

. . .Class legislation, discriminating against some and favoring others,

is prohibited; but legislation which, in carrying out a public purpose, is
limited in its application, if within the sphere of its operation it affects
alike all persons similarly situated, is not within the Amendment.

The case of Young vs. Rafferty, supra, of Philippine origin we have heretofore
noticed. But later in point of time, a question was raised in the Philippine
courts relative to the power of the Municipal Board of the City of Manila to
enact Ordinance No. 532, requiring receipts in duplicate in English and
Spanish duly signed, showing the kind and number of articles delivered by
laundries and dyeing and cleaning establishments. (Kwong Sing vs. City of
Manila, supra.) It was held that as said ordinance was neither oppressive, nor
unequal, nor unjust, it was valid. It was said:

The purpose of the municipal authorities in adopting the ordinance is

fairly evident. Ordinance No. 532 was enacted, it is said, to avoid
disputes between laundrymen and their patrons and to protect
customers of laundries who are not able to decipher Chinese
characters from being defrauded. The object of the ordinance was,
accordingly, the promotion of peace and good order and the prevention
of fraud, deceit, cheating, and imposition. The convenience of the
public would also presumably be served in a community where there is
a Babel of tongues by having receipts made out in the two official
languages. Reasonable restraints of a lawful business for such
purposes are permissible under the police power. The legislative body
is the best judge of whether or not the means adopted are adequate to
accomplish the ends in view.

xxx xxx xxx

Our view, after most thoughtful consideration, is, that the ordinance
invades no fundamental right, and impairs no personal privilege. Under
the guise of police regulation, an attempt is not made to violate
personal or property rights. The ordinance is neither discriminatory nor
unreasonable in its operation. It applies to all public laundries without
distinction, whether they belong to Americans, Filipinos, Chinese, or
 any other nationality. All, without exception, and each and everyone of
them without distinction, must comply with the ordinance. There is no
privilege, no discrimination, no distinction. Equally and uniformly the
ordinance applies to all engaged in the laundry business, and, as
nearly as may be, the same burdens are cast upon them.

xxx xxx xxx

There is no analogy between the instant case and the former one of
Young vs. Rafferty ( [1916], 33 Phil., 556). The holding there was that
the Internal Revenue Law did not empower the Collector of Internal
Revenue to designate the language in which the entries in books shall
be made by merchants subject to the percentage tax. ... There, the
action was taken by means of administrative regulation; here, by
legislative enactment. There, authority was rested on specific
delegated powers; here, on both specific power and the all-pervading
police power. There, governmental convenience was the aim; here, the
public welfare. We are convinced that the same justices who
participated in the decision in Young vs. Rafferty (supra) would now
agree with the conclusion toward which we are tending.

The case most directly in line with the facts before us, is that of the King vs.
Lau Kiu ( [1888], 7 Hawaii, 489), decided by the Supreme Court of the Hawaii
Islands during the period of the monarchial regime in those Islands. An Act of
the Hawaii Legislature prescribed, that no wholesale or retail license should
be granted to any person except upon the express condition that the
licensee shall at all times keep full, true, and correct books of account of all
business transacted by him in connection with such license, in the English,
Hawaii, or some European language. It was contended among other things
that this was legislation against one certain class of subjects in the
Kingdom, to wit, against such subjects (and particularly the Chinese) as do
not speak or write the Hawaiian, English, or any European language, and was
not applicable to all citizens alike. It was held by the Supreme Court that this
Act was contrary to articles 1 and 14 of the Constitution, which secure to all
persons the enjoyment of life and liberty and the right of acquiring,
possessing, and protecting property according to law. It was held, further,
that the Act could not be sustained as an exercise of the police power of the
state, as it had no relation to the health, comfort, safety, or welfare of the
public.
The presumption is always in favor of constitutionality. As the United States
Supreme Court in a case of Philippine origin said: "... The function of the
legislature is primary, its exercise fortified by presumption of right and
legality, and is not to be interfered with lightly, nor by any judicial conception
of its wisdom or propriety. ..." (Weems vs. United States [1910], 217 U.S.,
349.) This presumption is especially strong in the case of statutes enacted to
promote a public purpose, such as statutes relating to taxation. To doubt is to
sustain.

Only the other day, the United States Supreme Court, speaking through Mr.
Justice Sutherland, said:

The judicial duty of passing upon the constitutionality of an act of

Congress is one of great gravity and delicacy. The statute here in
question has successfully borne the scrutiny of the legislative branch of
the government, which, by enacting it, has affirmed its validity; and
that determination must be given great weight. This court, by an
unbroken line of decisions from Chief Justice Marshall to the present
day, has steadily adhered to the rule that every possible presumption
is in favor of the validity of an act of Congress until overcome beyond
rational doubt. But if, by clear and indubitable demonstration, a statute
be opposed to the Constitution, we have no choice but to say so. . . .
(Adkins vs. Children's Hospital of the District of Columbia [1923], 261
U.S., 525; 67 Law. ed., 785.)

That the Supreme Court of the Philippine Islands has consistently followed
these rules is disclosed by the few laws held invalid. During the twenty-three
years of the Supreme Court's existence, it has never held invalid one
complete law, while portions of law have been nullified on but few occasions.
(Casanovas vs. Hord [1907], 8 Phil., 125; Omo vs. Insular Government
[1908], 11 Phil., 67; Weigall vs. Morgan Shuster [1908], 11 Phil., 340;
Barrameda vs. Moir [1913], 25 Phil., 44; McGirr vs. Hamilton and Abreu
[1915], 30 Phil., 563; Central Capiz vs. Ramirez [1920], 40 Phil., 883;
Concepcion vs. Paredes [1921], 42 Phil., 599; McDaniel vs. Apacible and
Cuisia [1922], 44 Phil., 248.)

It may be said to be an elementary, a fundamental, and a universal rule of

construction, applied when considering constitutional questions, that when a
law is susceptible of two constructions one of which will maintain and the
other destroy it, the courts will always adopt the former. Whenever a law can
be so construed as to uphold it, it will be so construed although the
construction which is adopted does not appear to be as natural as another
construction. But where the meaning of the Act is plain, words cannot be
read into it or out of it in order to save the law. (1 Lewis' Sutherland Statutory
Construction, pp. 135, 136; Cooley's Constitutional Limitations, 184; 6 R.C.L.,
78.)

In the early case of United States vs. Coombs ( [1838], 12 Peters, 72), Mr.
Justice Story, speaking for the United States Supreme Court, said:

Before we proceed to the direct consideration of the true import and

interpretation of this section, it seems highly important, if not
indispensable, to say a few words as to the constitutional authority of
Congress to pass the same. For it, upon a just interpretation of the
terms thereof, Congress have exceeded their constitutional authority, it
will become our duty to say so, and to certify our opinion on this points
submitted to us in favor of the defendant. On the other hand, if the
section admits of two interpretations, each of which is within the
constitutional authority of Congress, that ought to be adopted which
best conforms to the terms and the objects manifested in the
enactment, and the mischiefs which it was intended to remedy. And
again, if the section admits of two interpretations, one of which brings
it within, and the other presses it beyond the constitutional authority of
Congress, it will become our duty to adopt the former construction;
because a presumption never ought to be indulged that Congress
meant to exercise or usurp any constitutional authority, unless that
conclusion is forced upon the court by language altogether
unambiguous. . . .

In the later case of Board of Supervisors of Grenada County vs. Brown

( [1884], 112 U.S., 261), Mr. Justice Harlan, speaking for the United States
Supreme Court, said:

It certainly cannot be said that a different construction is required by

the obvious import of the words of the statute. But if there were room
for two constructions, both equally obvious and reasonable, the court
must, in deference to the Legislature of the State, assume that it did
not overlook the provisions of the Constitution and designed the Act of
1871 to take effect. Our duty, therefore, is to adopt that construction
which, without doing violence to the fair meaning of the words used,
 brings the statute into harmony with the provisions of the Constitution,
Cooley Constitutional Law, 184-5; Newland vs. Marsh, 19 Ill., 384;
People vs. Supervisors, 17 N.Y., 241; Colwell vs. Water Power Co., 4 C.E.
Green (19 N.J. Eq.), 249. And such is the rule recognized by the
Supreme Court of Mississippi in Marshall vs. Grimes, 41 Miss., 31, in
which it was said: "General words in the Act should not be so construed
as to give an effect to it beyond the legislative power, and thereby
render the Act unconstitutional. But, if possible, a construction should
be given to it that will render it free from constitutional objection; and
the presumption must be that the Legislature intended to grant such
rights as are legitimately within its power." Again, in Sykes vs. Mayor,
55 Mississippi, 143: "It ought never to be assumed that the lawmaking
department of the government intended to usurp or assume power
prohibited to it. And such construction, if the words will admit of it,
ought to be put on its legislation as will make it consistent with the
supreme law."

Identical canons of statutory construction have often been invoked in the

Philippines to enable the courts to avoid declaring a law unconstitutional. For
instance, the decision in the well known case of In re Guariña ( [1913], 24
Phil., 37, 46), citing Black on Interpretation of Laws, pp. 87, 93, and 94, is
authority for this statement of the rule: "It is the duty of the courts in
construing a statute enacted by the Philippine Commission (Legislature), not
to give it a construction which would be repugnant to an Act of Congress, if
the language of the statute is fairly susceptible of another construction not in
conflict with the higher law; and in doing so, contentions touching the
apparent intention of the legislator will be disregarded which would lead to
the conclusion that the Commission intended to enact a law in violation of an
Act of Congress." Not long since, this court, in the case of Fuentes vs.
Director of Prisons, No. 22449,1 saved Act No. 3104 relating to the death
penalty, from a fate similar to its subject by refusing to give a literal meaning
to the phraseology of the law.

We have been enveigled into a much more elaborate discussion of this case
than is at all essential, for two reasons: Firstly, because of the earnestness of
counsel who have impressed on the court with marked ability the merits of
their respective cases and the dangers which lurk in a contrary holding; and
secondly, because of the effectiveness of the background as indicative of
executive purpose and legislative intent. Speaking frankly, however, a
majority of the court has all the time had a well defined opinion which we will
now state. We come to the last question suggested, a construction of Act No.
2972 which allows the court legally to approve it.

A literal application of the law would make it unlawful for any Chinese
merchant to keep his account books in any language other than English,
Spanish, or a local dialect. The petitioners say the law is susceptible of that
interpretation. But such interpretation might, and probably would, cause us
to hold the law unconstitutional.

A second interpretation is that the Chinese merchant, while permitted to

keep his books of account in Chinese, must also keep another set of books in
either English, Spanish, or a native dialect. The respondents claim the law is
susceptible of such construction. It occurs to us, however, that this
construction might prove as unsatisfactory as the first. Fraud is possible in
any language. An approximation to governmental convenience and an
approximation to equality in taxation is the most which may be expected.

A third construction which is permissible in view of the history of the

legislation and the wording of the statute, is, that the law only intended to
require the keeping of such books as were necessary in order to facilitate
governmental inspection for tax purposes. It has not escaped our notice that
the law does not specify what books shall be kept. It is stated by competent
witnesses that a cash book, a journal, and a ledger are indispensable books
of account for an efficient system of accounting, and that, in the smaller
shops, even simpler entries showing merely the daily record of sales and
record of purchases of merchandise would be sufficient. The keeping of
records of sales and possibly further records of purchases, in English
Spanish, or native dialect, and the filling out of the necessary forms would
serve the purpose of the Government while not being oppressive. Actually,
notations in English, Spanish, or a dialect of all sales in sales books, and of
data in other specified forms are insisted upon by the Bureau of Internal
Revenue, although as appears from Exhibit 2, it is doubtful is all Chinese
merchants have complied with these regulations. The faithful observance of
such rules by the Chinese is not far removed from the offer of cooperation oft
made for them by the petitioners or the "translation of the account books"
oft mentioned and explained by the respondents.

The law, in speaking of any person, company, partnership, or corporation,

makes use of the expression "its account books." Does the phrase "its
account books" mean that all the account books of the person, company,
partnership, or corporation must be kept exclusively in English, Spanish, or
any local dialect? The petitioners argue that the law has this meaning. Or
does the phrase "its account books" mean that the persons, company,
partnership, or corporation shall keep duplicate sets of account books, one
set in Chinese and the other a translation into English, Spanish, or any local
dialect? Counsel for the respondents urge this construction of the law upon
the court. Or does the phrase "its account books" mean that the person,
company, partnership, or corporation must keep such account books as are
necessary for taxation purposes? This latter interpretation occurs to us as a
reasonable one and as best safeguarding the rights of the accused. And
lastly, what effect has Act No. 2972 had upon the provisions of the Code of
Commerce on the subject of merchants? Has the Act repealed or modified
any article of the Code of Commerce?

The interrogatories above made at least lead to the deduction that the law is
more or less ambiguous and that it will bear two or more constructions.

Let us repeat: Act No. 2972 is a fiscal measure. It should be so construed if

possible as to effectuate legislative intent, as collected from the occasion for
the law, the circumstance under which it was enacted, the mischief to be
remedied, and the policy which dictated its passage. It should be so
construed if possible as to avoid conflict with the constitution, although such
construction may not be the most obvious or natural one. Giving, therefore,
to the law a meaning which will carry out the main governmental purpose
and which will permit us to sanction its constitutionality, it seeks to prohibit
not only the Chinese but all merchants of whatever nationality from making
entries in the books of account or forms subject to inspection for taxation
purposes in any other language than either the English or Spanish language
or a local dialect, although permitting all merchants to execute their
commercial transactions or operations in any language or dialect they may
prefer, and although permitting them to keep such other books of account as
their personal convenience may dictate and in a language which will come
most easily to them. We would go so far as to hold that circular No. 467 of
the Bureau of Internal Revenue which this court once held beyond the power
of the Collector of Internal Revenue to promulgate, and any other reasonable
regulation of a similar nature, as within the power of the Philippine
Legislature to sanction and entirely enforceable.

To any possible plaint by the Government, that this is tantamount to "judicial

legislation," we would say: It is not "judicial legislation" as this phrase is
commonly used in the spirit of antagonistic fault finding. No words are
written into the law. No words are taken out of the law. It is merely a practical
judicial construction of a law where the validity of this law is in issue, which
gives to the law a meaning accomplishing everything needed by the
Government for tax purposes, without being unduly oppressive on the
individual, and which permits the courts to uphold the law.

To the petitioners, who by our decision do not obtain all they may wish, we
append this word of advice: Under such a construction as is above indicated,
the Chinese will not be singled out as a special subject for discriminating and
hostile legislation. There will be no arbitrary deprivation of liberty or arbitrary
spoliation of property. There will be no unjust and illegal discrimination
between persons in similar circumstances. The law will prove oppressive to
the extent that all tax laws are oppressive, but not oppressive to the extent
of confiscation. The means to accomplish a necessary interference with
private business are no more oppressive upon individuals than is necessary
to maintain the State. The law is not intended for the convenience of the
trader or the protection of the creditors, but has relation to the public
welfare, to the power of taxation, to the right of the government to exist. The
Chinese must bear their just proportion of the tax burden, however
unwelcome it may be, without flinching.

A faint effort has been made by the petitioners to have the court declare Act
No. 2972 void because the subject thereof is not expressed in its title. But
legislation should not be embarrassed by such strict construction as is urged
by counsel. No distinguishable variance between the title of the law and the
body of the law can be discovered after microscopic examination. The law is
brief in its terms, and neither the Legislature nor the public need be misled
by the title. (Government of the Philippine Islands vs. Municipality of
Binalonan and Roman Catholic Bishop of Nueva Segovia [1915], 32 Phil.,
634.)

We construe Act No. 2972 as meaning that any person, company,

partnership, or corporation, engaged in commerce, industry, or any other
activity for the purpose of profit in the Philippine Islands, shall keep its
account books, consisting of sales books and other records and returns
required for taxation purposes by regulations of the Bureau of Internal
Revenue, in effect when this action was begun, in English, Spanish, or a local
dialect. Agreeable to such construction, we hold Act No. 2972 valid and
constitutional.
The temporary injunction heretofore issued is dissolved although under the
construction given to the law it may well be doubted if the Government will
care to proceed with the criminal prosecution. If the Government should not
dismiss the information, this question may be raised by demurrer in the
lower court.

Petition denied without costs.

Avanceña, Villamor, Ostrand, and Romualdez, JJ., concur.

Johnson, Acting Chief Justice, took no part.